AVS Agreement: What it is and Why it Matters

AVS, or Address Verification Service, is an important tool that helps merchants verify the billing address of a customer making a purchase with a credit or debit card. This service is provided by the card networks, such as Visa, MasterCard, and American Express, and is designed to reduce fraudulent transactions and chargebacks.

AVS works by comparing the numerical portion of the billing address entered by the customer at checkout with the address on file with the card issuer. The result is a code that indicates whether the address matches exactly, partially, or not at all. Merchants can then use this information to decide whether to accept or decline the transaction.

An AVS agreement is a contractual agreement that outlines the terms and conditions under which a merchant can use the AVS service. This agreement is typically part of a larger merchant services agreement between the merchant and their payment processor. The AVS agreement specifies the fees associated with using the service, as well as the merchant`s responsibilities when it comes to verifying customer addresses.

The AVS agreement also sets forth the requirements for the merchant`s e-commerce platform or point-of-sale system to support the AVS service. This includes the technical specifications for transmitting the address verification request to the payment processor and receiving the response.

Why does the AVS agreement matter?

The AVS agreement is important for merchants because it helps reduce the risk of fraud and chargebacks. By requiring customers to enter a billing address that matches the address on file with the card issuer, merchants can verify that the customer is authorized to use the card.

Additionally, the AVS agreement provides clarity on the fees associated with using the service, which can vary depending on the payment processor and the type of transaction. This can help merchants manage their costs and avoid unexpected charges.

Finally, the AVS agreement helps ensure that the merchant`s e-commerce platform or point-of-sale system is properly configured to support the AVS service. Without this support, merchants may not be able to use the service, which could result in increased fraud and chargeback rates.

In conclusion, the AVS agreement is an important part of the merchant services agreement between a merchant and their payment processor. By providing a clear framework for using the AVS service, this agreement helps reduce fraud and chargebacks, manage costs, and ensure that the merchant`s systems are properly configured. As such, it is essential for merchants to carefully review and understand the terms and conditions of their AVS agreement.